Irma & Harvey, just an earnings event

Thursday, 09 07 2017, Category: Nature, Country: World

Reflecting just how well capitalised the reinsurance industry is, analysts at Morgan Stanley said today that they believe that even the aggregate industry losses from hurricane Irma and hurricane Harvey combined could still only be an earnings event for the sector, rather than a capital event.Hurricane Harvey alone was always assumed as an earnings event, given the weighting towards flood exposures and the fact primary insurers are set to retain a lot of the losses.But for category 5 hurricane Irma, as it barrels towards Florida with 185 mph winds, the expectation is that reinsurers will take a much greater proportion of any eventual losses, as Florida primary insurers tend to use plentiful reinsurance and the U.S. nationwide players (which tend to have higher retentions) are in some cases less exposed there.

Additionally, the impact of a second hurricane in such quick succession will bring into question some primary insurers reinsurance programs ability to withstand frequency losses, as well as the severity of a single event. This could also be a factor in certain retrocession arrangements.